Maximizing the ROI of Telehealth

By now, telehealth has become table stakes for any organization providing healthcare services, though surprisingly few leaders are putting resources toward a build out and growth of their telehealth services. Equally surprising, quite a number of clinicians, especially in the family medicine realm, continue to be reluctant or outright opposed to fully embracing telehealth as a viable alternative to in-person care.

For many clinicians the reasons for their reluctance are easily overcome, e.g., by investments in at least

• a telehealth solution that provides a highly satisfactory experience for clinicians and patients alike
• the design and implementation of telehealth workflows optimized for the effective use of the clinicians time
• timely access to qualified support, such as a Telehealth Coordinator
• telehealth training for clinicians providing pertinent information for clinicians

The reasons for the lack of investment? Because leaders cannot see a strong positive ROI from such an investment. For many leaders this is an expense that seemingly does not generate more revenue than in-person visits.

But that assumption (or conclusion) is a fallacy, that assumes that patients will just go back to in-person visits if telehealth is not an option (or provided a bad experience) and that also misses low-hanging fruit opportunities to grow revenue through telehealth (such as converting same-day cancellations into telehealth visits).

Elements of Telehealth ROI

ROI, or return on investment, is a simplified calculation that, generally speaking, calculates the value of an investment: If for every 10 dollars invested you generate 25 dollars worth of return, your return on that 10 dollar investment is 15 dollars, or 150%.

A positive ROI is obviously important to sustain the service, otherwise it needs to be subsidized. Across any given health system a number of health services are “money losers” that need to be subsidized by those services with a high return on investment.

When we work with our clients we aim to develop a program-level telehealth accounting system that looks at the cost and the benefits (“value generated”) of all telehealth services. The idea behind that approach is to ensure the overall sustainability of the telehealth program by ensuring that those services that may provide a negative ROI are offset by those that provide a positive ROI.

For example, some RPM programs aimed at preventing readmissions return $130 dollars for every $10 invested, an ROI of 13:1 or 1,300%! (I’d like to have that kind interest on my savings account! ??) Other services, due to issues with collections on copays or lower reimbursement, may have negative ROIs of -20%, i.e., a loss of $2 on every $10 invested.

Qualitative and Quantitative Value

The value in an ROI calculation can be measured both quantitatively and qualitatively.

Qualitative value measures intangible things such as patient or physician satisfaction or the net promoter score (NPS) that measures patients willingness to recommend, to promote the service to others. While they can be measured, they are qualitative in the sense that they are highly subjective and also cannot easily and reliably be converted into dollar amounts.

The most obvious quantitative value measure is the reimbursement or cash pay for the rendered telehealth service. Other quantitative measures that we’ll discuss in more detail below, include other means of generating revenue as well as increasing savings or securing grants.

The Cost of Telehealth

To calculate the ROI, you first need to comprehensively account for all the costs associated with providing the service. This includes the salary of the clinicians as well as the clinical and administrative support staff; and ongoing technology licensing fees as well as the depreciation of one-time investments, such as hardware or software acquisition and installation cost.

A note on the licensing cost: these days most telehealth solutions are very reasonably priced at a flat rate per month or per year. Given the marketplace dynamics of recent years, there is little differentiation between vendors to boost the ROI of a telehealth service. Given a typical volume of telehealth visits per month — even if only practiced part time — the per-visit fees of the technology investments can be as low as $0.50.

The highest cost of any telehealth services is thus by far the cost of the clinicians, though the cost of support staff (especially in services whose workflows are not optimized or when highly cumbersome or non-intuitive technology is used) can also contribute significantly to this side of the ROI equation.

Telehealth Value with an Impact on the Bottom-Line

When looking at the quantifiable value of telehealth there are two areas of value that have an impact on the bottom line: increasing revenue and increasing savings.

Aside from the obvious reimbursement there are however a number of other ways to increase revenue with a telehealth service:

1. Fee-for-service reimbursement
2. Increase in utilization through increased convenience
3. Meeting demand through a higher capacity with virtual clinicians
4. Geographic expansion leading to increase in utilization (and billing)
5. Expansion of service offerings (e.g., new specialities via telehealth)
6. Drastic (80%) reduction of no shows (from 20% to 4%)
7. Referrals and downstream service utilization.
8. Eligibility for grant programs
9. Co-Pay Collection Optimization

On the other side, here are the number of ways to increase savings through telehealth:

1. Readmission prevention: reducing non-reimbursed hospitalizations and related penalties
2. Reducing high-cost utilization in ACO/Shared Savings arrangements
3. Skilled Nursing Facility spending & readmissions (MSPB)
4. Load-balancing to increase utilization of available capacity
5. Value-based care programs
6. Quality-score based incentive programs
7. State-specific potentially avoidable utilization penalties
8. Other penalties or payment reductions.

Maximizing your Telehealth ROI

As illustrated by these two lists, there are a number of ways telehealth can be leveraged as a strategic tool to drive the increase in revenue or the increase in savings, based on the circumstances and strategic priorities of the organization.

As laid out in the cost section, lower technology-related expenses usually is not the most lucrative way to increase the ROI, unless of course you are subscribing to an expense service that provides the clinicians in addition to the technology. Here, the solution may be to bring the services in house.

The three most powerful tactics to maximizing Telehealth ROI are:

1. Roll up the ROI of all telehealth services at the telehealth program level to manage all virtual care offerings together to achieve synergies.
2. Focus on building and growing those services with a high potential for a high ROI, rather than “making it up in volume” for telehealth services that are losing money each visit
3. Intentionally select new telehealth service offerings that can be designed for maximum ROI, thus using telehealth as a strategic tool, for example, to eliminate penalties, reduce no shows, etc.

Comparing Apples to Apples

One of the key concepts of Telehealth ROI modeling is to also keep in mind the ROI of the established in-person care model. Oftentimes the ROI of telehealth should be seen as “relative” to the ROI of in-person care.

It would be shortsighted to chastise telehealth for its low ROI, without establishing a true comparative baseline from the cost and benefits of in-person visits.

How are you measuring the ROI of your telehealth service offerings? When launching a new service, do you set expectations for an ROI? Let me know if you’d like to discuss.

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Christian Milaster and his team launch, expand, and grow Telehealth Programs for rural health centers, behavioral health agencies, health systems, schools, and libraries. Christian is the Founder and CEO of Ingenium Digital Health Advisors where his team and consortium of experts partner with healthcare leaders to enable the delivery of extraordinary care by accelerating the adoption of digital health innovation.

To explore how we can help your organization solve your challenges, contact Christian by phone or text at 657-464-3648, via email , or video chat .